While Latin American GCs relied heavily on their external counsel amid political and economic uncertainty in 2018, LACCA’s landmark research into “Who Represents Latin America’s Biggest Companies” reveals that the region’s most popular firms are those taking a more proactive client-centric approach and staying ahead of the curve.

General counsel know better than most how even modest disruption can have a huge impact on a company’s bottom line if improperly managed or mitigated. Today’s GCs, therefore, must not only remain ahead of the curve when it comes to rapid political, economic and legislative developments in their home jurisdictions, but they are also expected to anticipate and spot risks arising beyond their borders, and all this while facing intense pressure to cut legal spend and boost efficiency within their departments.

For the GCs at Latin America’s leading companies, such a colossal task was made even more difficult as the region grappled with the uncertainty brought about by elections and political shifts in major jurisdictions in 2018, not to mention a flurry of new regulatory trends, sweeping reforms and local economic pressures affecting business across sectors.

Navigating this ever-evolving and increasingly complex political and legislative landscape would be near impossible without the help and expertise of highly sophisticated local and international law firms. In fact, whether it’s defending the company in high-stakes litigation cases, launching an internal investigation into allegations of corporate misconduct or implementing changes resulting from an extensive tax reform, the ability of corporate counsel to quickly call on additional resources or specialist advice can help companies not only survive in times of uncertainty, but also flourish.

Meeting new needs

While the need for specialised legal services was particularly pronounced over the course of last year in Latin America, the increasing sophistication of local in-house legal departments has resulted in a shift in what clients are demanding from their service providers. GCs want quicker and more efficient services, without compromising on excellence and costs, and this year’s research into “Who Represents Latin America’s Biggest Companies” suggests that firms implementing strategies to adapt to these new demands are reaping the benefits.

This year’s list of the region’s largest companies is once again dominated by Brazilian companies, so it is no surprise that Brazilian firms take the top spots in terms of the most popular in the region. For the second year in a row, full-service firm Pinheiro Neto Advogados took the top spot, representing just over half of the region’s largest 100 companies, including important regional players in the extractive and energy sectors such as AES, Petrobras, Gerdau and Vale. “Last year was surprisingly good, much above expectations,” says Alexandre Bertoldi, managing partner at the firm. “After a long recession and in a turbulent political scenario, no forecast was optimistic. However, the economic activity picked up in the second quarter and we benefitted from that.” In second place this year was transactional titans Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados, boasting major international clients including AB InBev, Bunge and Louis Dreyfus, while mining specialists Azevedo Sette Advogados took the third spot, with behemoths including Grupo Mexico, Gerdau and Votorantim among their books.

Marked by a highly divisive election campaign in 2018, which led to the victory of far-right candidate Jair Bolsonaro , many Brazilian firms reported a change in the type of work they undertook as a result of the political uncertainty, moving away from big transactions and complex M&As. “This year was a very different year for the firm, we normally see a slow start and the last two quarters tend to be the busiest, but this year was the reverse,” says Luiz Sette, of Azevedo Sette Advogados. “Bigger transactions stalled as clients were waiting to see what would happen with the elections and instead, practice areas including compliance, litigation and tax planning saw an increase in demand.”

The in-house legal market in Brazil is also one of the most developed in the region, given the country’s economic importance and the fact that it is often a regional hub for major multinationals. Local legal departments in Brazil represent not only some of the largest in terms of size in the region, they are also becoming increasingly sophisticated, forcing many firms to adapt their businesses models to provide more tailored services. “Our clients are doing more and more in-house and often outsource the most sophisticated work. They are expecting more from us, so we invest in getting to know our clients as thoroughly as we can,” says Sette. Other firms, including Pinheiro Neto, are even changing their structures to better serve client needs. “The in-house teams are much better qualified today than they were 10 years ago,” says Bertoldi. “Clients use law firms like ours only for special cases or more complex matters. In fact, this has changed our business model, today we have a much more senior team, with fewer trainees and junior associates.”

In addition to Pinheiro Neto Advogados, Mattos Filho and Azevedo Sette, some of the Brazilian firms that came out on top this year included Machado Meyer Advogados, Bichara Advogados, corporate and M&A specialists Lefosse Advogados and elite full-service firm Veirano Advogados.

International firms also featured prominently in the top spots and while they do not directly compete with local firms, they will often work alongside them on transactions and deals and LACCA’s research illustrates the strong position these firms continue to hold in the Latin America legal market. US firm Cleary Gottlieb Steen & Hamilton LLP came out on top this year and is regular counsel to more than one-third of the leading companies on our list with a broad reach that not only crosses national borders, but also a variety of sectors with high-profile regional clients including Cemex, Grupo Bimbo, Codelco and Embraer. Milbank was in close second, representing 34 out of the 100 largest companies in the region including the likes of retail giant Cencosud and oil and gas company YPF. “We assist clients with leveraging and strengthening their business in the global economy and are their go-to for offerings and additional innovative financial instruments that help them as they grow and change with the ever-shifting economies of Latin America,” says Marcelo Mottesi, partner at Milbank.

Given that international firms have a regional rather than jurisdictional focus, they tend to possess a different perspective and set of priorities to their local counterparts and while a number of international firms reported that regional elections did affect the level of work over the past year, many of these external factors tend not to disrupt the type of work international firms tend to oversee. “The blue-chip companies that we represent, are often less impacted by elections and thus often require services when smaller companies are not as active,” says Paco Cestero, partner at Cleary Gottlieb. Rafeal Mínguez of Spanish firm Cuatrecasas points to a similar trend, stating that despite some of the external factors that could have affected work for the firm, they experienced a high level of activity. “Large Spanish multinationals operating in the region look for the same quality standards and service as they have in Spain, which increased our work significantly, together with the work carried out for other local players,” he says.

Many international firms have also been responding to the growing sophistication of corporate legal departments in Latin America, and have been continuing to implement measures to adapt to the changes in the best way they can. Nick Grabar from Cleary Gottlieb says the firm has been expanding its multilingual teams and subject matter experts that focus on Latin America. Antonio Baena of Cuatrecasas says their clients increasingly appreciate a single-entry point and value efficiency in all processes, which might include alternative fee arrangements. “They also value other non-cost “additional services,” including training, secondments and tailored legal updates,” he says. Milbank, on the other hand, have been focusing on implementing technological tools to help them provide a more seamless service to in-house teams across the region. “Milbank has always been at the forefront of providing innovative solutions to our clients and [Will] continue to do so using state of the art technologies,” says firm partner Dan Bartfeld.

In Argentina over the past year, things certainly did not go as President Mauricio Macri would have liked. While many in the legal community welcomed the sweeping tax and administrative reforms made earlier in the year, which sought to improve the business environment and encourage investment, the changes fell short. The country continued to fight the worst recession in years, with the International Monetary Fund (IMF) bailing the country out with a US$57 billion loan - the biggest one ever in the IMF’s history, and the peso has continued to plummet due in part to rising US interest rates which affected business for local firms. “The capital markets and corporate finance practice areas saw a drop in workload as a consequence of the Argentine financial crisis, and the decision of the US Treasury to increase the interest rates - which affected all emerging markets,” says Santiago Carregal, chairman of Marval, OFarrell & Mairal.

Despite a drop in foreign investments, many local firms saw an uptake in other practice areas including compliance and tax planning as a result of new legislation. In late 2017, Argentina enacted its first corporate liability law and recent high-profile corruption investigations have brought the issue to the forefront for local businesses. Many local GCs have been seeking advice to ensure their companies are in compliance and up-to-date. “The anti-corruption law had a major impact on the firm’s work,” says Carregal. “While compliance and investigations are a growing global trend, in Argentina it is particularly relevant both because of the new legislation and the Notebooks case.”

This year, Marval was once again the firm with the most clients, boasting major international behemoths including oil and gas company Schlumberger, consumer goods giant Néstle and automotive companies Volkswagen, Renault, Fiat and Ford. A large part of the firm’s success over the past year, according to Carregal, has been due to their efforts to increase expertise and use technology to focus on providing a better service to clients. “Attracting, training and retaining talent is key to stay competitive and to help our clients in sophisticated or complex matters. Additionally, investing in technology and artificial intelligence to make our services more efficient has been important,” he explains. Corporate powerhouse Pérez Alati, Grondona, Benites & Arntsen came in second place this year, closely followed by Nicholson y Cano Abogados and Mitrani Caballero & Ruiz Moreno in joint-third.

Meanwhile in Mexico, law firms faced a somewhat uncertain climate. With the historic landslide election victory of President Andrés Manuel López Obrador (AMLO) in July, Mexican markets, and foreign investors, waited see what the new administration would do following his inauguration in December. Having hinted at plans to scrap the country’s 2013 energy reform, which opened the country’s oil and gas sector to private investment, alongside his decision to cancel the US$14.5 billion-dollar airport project in Mexico City at the end of 2018, many were concerned that investors would be put off; however Daniel Del Rio, partner at Basham, Ringe y Correa, says that while M&A slowed down as a result of the uncertainty, the situation also boosted work for the firm. “Some practice areas slowed down as people were waiting to see what happened with the new government, particularly big transactions, but on the other hand, many of our clients seek help from local counsel when it comes down to the complexity of dealing with uncertainty,” he says. In fact, Basham was the most popular Mexican firm among the region’s largest companies and Del Rio says many practice areas including anti-corruption and compliance and labour matters grew. In addition, the new trade agreement signed between Mexico, the US and Canada also boosted confidence in the local market towards the end of the year.

Beatriz Barrera, of Galicia Abogados noticed a similar trend and says the firm was busy helping clients navigate the uncertain terrain as a result of the elections. “The anticipation of a change in government and a threat of a new tax reform caused companies and individuals to prepare themselves by refinancing and working in their estate planning,” she says.

Many local firms in Mexico also focused on enhancing their client services over the past year. At Basham, Del Rio says the firm has continued to work on streamlining processes to deliver greater efficiency and are also doing more to ensure they are better aligned with clients’ needs. “We keep improving our services and have been ensuring we get feedback and reviews from our clients regularly so we can check they are getting exactly what they need from us,” he points out.

In neighbouring Central America, it was once again the firms with a cross-jurisdictional reach that remained the most popular among the leading 100 companies. Indeed, five of the six most popular firms among Latin America’s biggest companies have a regional focus, with BLP and Consortium legal leading the group.

While the business climate can be varied across the countries in the region, many would agree that the regional model seems well-suited to an area comprised of a relatively large number of small, interconnected markets. “Overall the GDP of Central America is less than Colombia. Clients want one point of contact, one invoice and one strategy; that’s why I think the regional approach works well for international companies operating locally,” says David Gutierrez of BLP.

In-house teams in Central America tend to be smaller than their counterparts elsewhere in the region and are often expected to manage the multi-geographical cluster as one, relying increasingly on local law firms to navigate the differing, and at times conflicting, legal landscapes. “Nowadays, clients are looking for the most efficient and specialised legal services. There is a big opportunity for firms like Arias, which has a multi-jurisdictional and multidisciplinary team that can address clients’ needs in a comprehensive manner,” says Carolina Flores, a partner at the firm. “Bigger companies prefer to manage their business interests in the area with one point of contact that can assure them of good legal advice with the least investment of time giving directions on the tasks or paying the fees.”

Many local firms reported considerable growth for 2018. In Costa Rica, the inauguration of President Carlos Alvarado and a new legislative assembly in May lifted a cloud of political uncertainty. The country is also in the process of becoming a member of the OECD and talks to join the Pacific Alliance are likely to resume in the coming months, boosting investor confidence. “We had excellent results; Costa Rica had an extraordinary performance, with a growth of 17% versus 2017,” says Flores. “We believe that our results are due to our continuous growth as a regional operation and to the stable growth of Central America’s economy overall.” Growth in practice areas such as IP, tax and energy were reported in Guatemala and Honduras by many firms; however, a significant drop in work was highlighted in Nicaragua, as violence and political unrest surrounding President Daniel Ortega’s administration continued to escalate. “We had a decline of 50% in Nicaragua, the situation has worsened and we have been cutting operational costs, but elsewhere we saw growth in all areas,” says BLP’s Gutierrez.

In Chile, the return of Sebastián Piñera for his second term in office in the March elections gave the country’s sluggish economy a much-needed boost, but the political deadlock faced by his administration due to opposition in Congress, has meant his plans to reform the local pensions and tax systems have been slow off the mark and the relative uncertainty has resulted in new projects and investments being put on hold. “In general, we had a good year. We were expecting more work, but the uncertainty affected the investment climate, decisions were delayed, and people were nervous,” says Jaime Carey, managing partner at full-service firm Carey. “On the other hand, work in tax planning, labour and litigation all grew as well as areas relating to data protection and banking regulation.”

As the new administration continues to press on with reforms, including plans to cut corporate tax rates to bolster growth, many in the legal community are optimistic that the period of uncertainty is coming to an end and say economic prospects appear bright. More and more international companies are looking to invest in Chile, particularly multilatinas looking for stable local markets in which to expand. Regional firm Philippi Prietocarrizosa Ferrero DU & Uría (Chile) came out on top this year with 30 of the region’s biggest companies on its books; however, local firms Carey, Guerrero Olivos, Cariola, Díez, Pérez-Cotapos and Bofill Mir & Alvarez Jana Abogados were also favourites among the region’s top 100 companies.

Colombia was yet another country to welcome a new president in 2018. In the first half of the year, local firms were affected by the uncertainty resulting from the highly polarised campaign between Iván Duque Márquez and his opponent Gustavo Petro, culminating in Duque winning the elections with almost 54% of the votes in August. Hopes for Duque’s government were high, his administration insisted on austerity and responsibility in the management of public resources and looked set to follow more business-friendly economic policies with promises to cut taxes and red tape and invigorate the country’s creative industries. Despite this, Duque’s proposed tax reform generated strong opposition from Parliament, including from within his own party, while lower-income and middle-class voters interpreted it as a tax on the poor and he was forced to present a diluted version to Congress. “Last year was a very unusual year due to a difficult political and economic environment. The political situation was very divided between far-right and far-left candidates with relatively little in the center, leaving investors concerned and affecting firms like us,” says Jaime Herrera, of Posse Herrera Ruiz. “There was a freeze on investments and Colombia experienced a growth rate of 2%, much lower than the average 5% rate of previous years.”

Duque’s support may have waned since taking office in August, but the sound economic policies and structural reforms undertaken by previous governments in recent years means Colombia continues to maintain a solid macroeconomic framework that is attractive to many of the region’s largest companies. The country is often used as an operational hub by multinationals operating across the Andean jurisdictions, and local legal teams have been growing both in size and sophistication. “GCs are handling more work and bringing more resources in-house, so we are finding we have to compete,” says Herrera. “Clients will come to us for complex matters so we have to add value as much as we can. We are attracting and retaining the best talent, but also increasing our specialisation in specific industries and training our lawyers.”

Law firms in Peru faced upheaval caused by the transition in government after corruption allegations led to the resignation of former President Kuczynski in March, which threatened business confidence and investment projects. However, the change in government has also paved the way for a new dawn for the country, culminating with the de facto vote of confidence in President Martín Vizcarra that took place in December in the form of a referendum centred on anti-corruption changes.

Peru’s economic outlook improved considerably over the course of 2018. The country is seeing an economic rebound due to rising commodity prices, while strengthening investor confidence in the local economy is expected to fuel business further and infrastructure spending is also expected to continue increasing. “We had a record year in 2018, which was surprising considering the country continues to struggle with political issues, including those derived from all the corruption scandals,” says Luis Carlos Rodrigo of local firm Rodrigo, Elías & Medrano Abogados. The political transition and tension caused by a number of corruption scandals involving the country’s politicians has also stalled infrastructure projects and decision making in many government levels, affecting work at the firm according to Rodrigo.. “The main drivers of work have been M&A, mining, litigation and arbitration, as well as tax. Additionally, compliance has also been an area that is growing rapidly.” While many firms pointed to a drop in work related to infrastructure projects, Vizcarra’s enthusiastic efforts to tackle corruption have also boosted services relating to compliance according to Mauricio Olaya, of Muñiz, Olaya, Meléndez, Castro, Ono & Herrera. “The contraction of our infrastructure practice area has been positively offset by the dynamic growth of our corporate and compliance practice areas, which have been helping our clients implement prevention models.”

In response to the growing economy, private practice firms have also noticed that in-house teams have been growing rapidly in Peru, leading many to look for new ways to add value and provide an increasingly strategic service to clients. “20 years ago, no more than 10 companies in Peru had an in-house legal department. By contrast, more than 60% of our clients currently have an in-house legal department, and there is no doubt that this change has required our firm to adapt to this new reality,” says Olaya. “We must have a more understanding attitude towards the needs of in-house legal teams, who must in turn respond to their own clients within the organisation.” For Rodrigo, the key is for firms to operate as real partners with in-house teams and become deeply involved with their business and specific industry. “Our best clients are those who have sophisticated in-house teams and share complex work with us, and using us as their “sounding box”, so that they can appreciate the value derived from us having a lot of experience with different companies that usually face similar risks, issues or negotiations.”

Firms in Uruguay experienced similar trends in terms of client demands for more specialised work over services related to day-to-day legal operations, and the strong economy and booming business climate in both countries has boosted work across practice areas. “We acted in relevant M&A deals like the purchase by FEMSA of CocaCola and also worked on many PPP projects that went ahead in Uruguay concerning significant infrastructure projects,” says Nicolás Piaggio of Guyer & Regules in Montevideo.

GCs are also pushing for greater efficiency in terms of how firms are delivering services. “Clients want a true business advisor that understands their business and the industry environment, but they also value a reduction in fees and more efficient delivery of service,” says Veronica Raffó of Ferrere in Uruguay. “We are well-known locally and have the reputation that means we do not need to stand out and compete, but we do need to always work to improve efficiency to meet these new needs and use technology to innovate.”

In Paraguay, firms have also experienced a rise in client demands for efficiency, particularly when it comes to more flexible billing arrangements, with many setting up open bids for firms to bid for work, according to Nestor Loizaga, partner at Ferrere in Paraguay. “We noted as a trend a tendency to review fee arrangements and more day-to-day work done in-house. One client has hired an external firm to deal with contract drafting for all the region based on templates prepared by local firms. Another client decided to set up an open bid between firms awarding the work to the one that offered the cheapest prices.”

A similar drive to improve services and innovate is also being felt by law firms in Venezuela. Though many would be forgiven to expect most firms to be entirely preoccupied with helping clients navigate the ongoing uncertainty as a result of political turmoil and ever-deepening economic catastrophe in Venezuela, local firms have also been busy adapting to shifting needs form their in-house colleagues. “Our clients are increasingly sophisticated teams and they in turn are demanding more efficiency from us,” says Fulvio Italiani. “I believe that the most effective way of increasing your sophistication and remaining competitive is by working in as many complex transactions and matters, so that for future cases you can show you are the firm with the most relevant specific experience. This the best training you can get.”

In Ecuador, the recent turn toward more market-friendly economic policies has lifted investor sentiment toward the Andean country and the economy has been feeling the benefits. President Lenin Moreno’s finance minister, Richard Martinez, has been pushing forward a plan to reduce debt and reduce the fiscal deficit and has been leading negotiations over legislation that would allow years of income tax exemption for new private investment over the next two years. “2018 was a record year for the firm both in terms of work, but also in terms of new clients,” says Pilar Olaya, partner at local firm Pérez Bustamante & Ponce Abogados.

While firms are enjoying the fruits of a more pro-business environment in Ecuador, they are also having to respond to growing client demands for quicker, cheaper and better services. Hourly rates are increasingly giving way to alternative arrangements for local legal teams, including blended rates and capped or fixed fees, but more and more local law firm practices are going further and implementing more strategic changes. “Being specialised is no longer enough. We have to know the business and industries we work with inside out, so we are changing the way we provide services and focusing on training and building more specialised teams across practice areas,” says Olaya. “We understand we are service providers and we know we are a commodity, so all our focus is going to be on the more sophisticated and complex areas.”

In-depth analysis on what factors are most important for GCs when selecting external counsel, as well as comparative data on how law firms are innovating to remain competitive, will be published in the coming weeks.